An audit is an examination by one or more auditors of the records, documents, processes, procedures, etc., to determine whether those things comply with certain specified requirements. The requirements may be outlined in the internal work process, rule, regulation, contract, or other documents.
Audit Purpose:
There are two main purposes of conducting an audit: Compliance and Improvement.1. Compliance
The purpose of an audit is to determine if the entity being reviewed is complying with the requirements. If the entity is not in compliance, then corrective action must be taken to bring it into compliance. This is called remediation. Remediation is taking steps to correct problems found during an audit. It includes actions such as correcting errors, changing policies, training employees, and making changes in systems.
2. Improvement
An audit is conducted for the purpose of improvement when the auditor has determined that there are areas where the entity being examined could improve. These improvements may relate to any aspect of the operation of the entity. For example, they may involve improving customer service, increasing efficiency, reducing costs, or increasing profitability.
Audit Scope:
Audit scope defines the extent and boundaries of an audit. Audit scopes vary depending on the type of audit being performed. An audit scope can also include additional information about the audit. The audit scope generally consists of a description of the following:
- plants, office locations to be audited
- functions to be audited
- organizational units to be audited
- activities and processes to be audited
- the period of activities covered by the audit
The scope of the review should be defined based on the following factors:
- The nature of the business activity being audited
- The complexity of the business activity being analyzed
- The risk associated with the business activity being audited
- The potential impact of non-compliance on the organization’s ability to perform its mission